Most Americans get health insurance through their employers. A significant percentage of people with disabilities do not have the ability to work, so this is not an option for them. And of course, the lack of employment will impact them in hand-to-mouth ways.
Fortunately, there are government benefits that are designed to provide for folks that are in this situation.
Many people with disabilities qualify for Medicaid, which is a jointly administered federal/state government health insurance program. Supplemental Security Income (SSI) is another need-based program that is self-explanatory.
Once eligibility for these programs has been granted, it is not necessarily permanent. An improvement in financial status can cause a loss of eligibility, and this can create problems under certain circumstances.
In some instances, a person will become disabled after suffering an injury in an accident that was not their fault. Under these circumstances, they will eventually receive a settlement or a court judgment. The windfall of money will push them into another financial category.
Benefit recipients sometimes come into money in other ways, so this is a relatively common scenario. What can a person do if they are put into this difficult position?
First Party Supplemental Needs Trust
It is possible for an individual with a disability to use their personally held resources to establish and fund a supplemental needs trust for their own benefit. Sometimes a parent, a grandparent, a legal guardian, or a court will be in a position to establish the trust with funds that are the property of the person that will be the beneficiary.
These legal devices are called first party or self-settled supplemental needs trusts.
The creator or grantor of the trust would empower a trustee to act as the administrator, and they would not be able to directly access the funds after the trust has been established. Under the rules of these programs, the trustee would be able to utilize the resources to purchase goods and services that make the grantor/beneficiary more comfortable.
Acceptable purchases include a home, a motor vehicle, vacations, electronic equipment, household furnishings, professional services, and the list goes on and on. As long as everything is done correctly, ongoing eligibility for government benefits would not be negatively impacted.
Medicaid Estate Recovery
The one piece of bad news that enters the picture when a first party special needs trust has been established is the Medicaid estate recovery phase. Under state and federal laws, the program is required to seek reimbursement from the estates of people that were enrolled during their lifetimes.
Since you cannot qualify for Medicaid if you have significant assets in your own name, they usually find nothing that they can take. The situation would be different if a self-settled special needs trust has been established, because there may be a remainder left after the death of the grantor/beneficiary.
Under these circumstances, the assets that remain in the trust would be available to Medicaid during these recovery efforts.
It is possible to establish and fund a supplemental needs trust with your own funds for the benefit of someone else. This is called a third party special needs trust. Assets that remain in this type of trust would go to a successor beneficiary; Medicaid would not be able to touch the remainder.
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